Are you buying into or selling in a seller's market?

South African home buyers and property trend watchers in the bigger centres are now regularly told that property market conditions have improved sufficiently to justify the belief that they are now in a seller’s market.

How does a potential home seller (or for that matter a buyer) decide if this is in fact true of the area in which he lives or hopes to live?

An initial, very obvious question to ask, said Tony Clarke, Managing Director of the Rawson Property Group is, “Are there any repossessed homes still awaiting sale in the area?” 

If there are several such forced sales on the go, he said, it is a sure sign that the area has still not fully recovered from the downturn and cannot be described as a seller’s market. At the moment there are relatively few such areas in South Africa but the question regarding them is nevertheless worth asking.

“Bear in mind,” he said, “that repossessed homes usually sell below their true market value and therefore not only spoil the area’s image but will in all probability also lower the average price of homes in their vicinity.”

The second question to ask, said Clarke, is “How long are homes taking to sell?”

“In the Rawson Property Group we have a number of franchises that are now regularly selling homes within two to four weeks of their being listed.  We also have some which quite frequently report sales taking place within 48 to 72 hours of the property coming onto the market.  Quite obviously in such areas, if stock is available, it has to be recognized that the market is very much slanted towards the seller.”

However, said Clarke, in general he would still accept the current rule of thumb that if, in today’s market conditions, a home sells within four months its area could be described as being a seller’s market and if it takes longer than six months to sell, the market cannot be described as being in favour of the seller.

Another factor to be assessed (if possible) is the general prosperity of the area in which the house is sited.  For example, said Clarke, now that the platinum mine strikes are over, Rustenburg property is already beginning to rise in price again.  Similarly, he said, Johannesburg’s CBD property, where massive Third World type trading is now prevalent throughout, is also seeing a significant rise in prices.

Clarke added that if, as he has suggested, many areas are now quite decidedly in a seller’s market, the next question to be asked is, “How long will these conditions last?”

“In answering this question, he said, “one has to refer to the major bank analysts and the consensus of opinion among them is that the tightness of today’s economy, rising interest rates, severe stock shortages and the banks’ very cautious approach to awarding loans will probably result in slower sales but also in continually rising prices in the year ahead.  Demand at the lower levels of the price spectrum is so strong that it is bound to affect price growth.  It would also be wise, I believe, to accept that growth will, as the banks have predicted, be only around 7 or 8% for much of the remainder of this year.”

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